Watchmaker turned property developer shows poor timing

A company with a chequered history of change proves diversification can be fatal and its investors are now suffering

Incorporated in 1951 and listed in 1970, for 45 years Lap Heng was in the boring old business of manufacturing and trading watches and clocks. However, that steadfastness was cast to the wind six years ago.

Since 1997, the company has shed its skin three times, lurching into completely new lines of business with each change in ownership. It became a Hong Kong property play only a year before the market reached its bursting point, and a 'wireless communications' company on the cusp of the high-technology meltdown.

But it was its latest reincarnation - as a Shanghai property concern after its purchase by mainland businessman Chau Ching-ngai in June last year - that was to prove the company's most momentous, taking it into the heart of a complex cross-border corruption scandal that is potentially linked to intrigue at the highest levels of the Chinese government.

The turbulent recent history of Lap Heng turned Guoco Land turned imGO turned Shanghai Land Holdings is also a classic case study of how a new generation of mainland entrepreneurs is using the stock market - and extensive connections with the great and the good of Hong Kong's commercial and legal establishment - to leverage their fortunes.

In 1996, six years before Chau arrived on the scene, Lap Heng lost exclusive distribution rights for the Orient watch brand and terminated its watch business.

This triggered a steep fall in the company's share price from about $3.50 to less than $2, followed by a prolonged period in 1996 during which it was suspended. The company's share price chart from this time resembles the electrocardiogram of a hospital patient who has gone into cardiac arrest.